Earnings call transcript: AirBoss Q1 2025 results miss forecasts, stock rises

AirBoss of America Corp. reported its first-quarter 2025 earnings, revealing an earnings per share (EPS) of -0.02, missing the forecast of -0.015. The company’s revenue also fell short of expectations at CAD 105.1 million compared to the forecasted CAD 111.75 million. Despite these misses, the stock price increased by 3.07% in trading following the earnings release, closing at CAD 4.03. According to InvestingPro analysis, AirBoss currently appears undervalued, with a "FAIR" overall financial health score of 2.39 out of 5, reflecting investor optimism surrounding the company’s strategic initiatives and future outlook.

Key Takeaways

• AirBoss missed both EPS and revenue forecasts for Q1 2025.
• The stock rose by 3.07% despite the earnings miss.
• The company reported significant improvements in EBITDA and free cash flow.
• Strategic focus on defense products and new production lines was highlighted.
• Ongoing geopolitical and economic challenges were acknowledged.

Company Performance

AirBoss of America Corp. demonstrated a mixed performance in Q1 2025. While the company missed its earnings and revenue forecasts, it achieved a year-over-year increase in net sales and improvements in several key financial metrics. The company’s strategic focus on defense products and investments in production capabilities were pivotal in maintaining investor confidence.

Financial Highlights

• Revenue: CAD 105.1 million, a 1.6% increase YoY.
• Earnings per share: -0.02, below the forecast of -0.015.
• Consolidated gross profit: CAD 18.5 million.
• EBITDA: CAD 8.0 million, up from CAD 4.3 million in Q1 2024.
• Free cash flow: CAD 4.4 million, improved from negative CAD 7.4 million a year ago.

Earnings vs. Forecast

AirBoss reported an EPS of -0.02, missing the forecast of -0.015 by 33.3%. Revenue also fell short, coming in at CAD 105.1 million against a forecast of CAD 111.75 million. This marks a deviation from the company’s historical trend of meeting or exceeding expectations, presenting a challenge for management to address in future quarters.

Market Reaction

Despite the earnings miss, AirBoss’s stock rose by 3.07% to CAD 4.03. This movement suggests investor optimism, potentially driven by the company’s strategic initiatives and improved financial metrics like EBITDA and free cash flow. The stock’s upward movement contrasts with its 52-week range, indicating a positive market sentiment despite broader economic challenges.

Outlook & Guidance

AirBoss remains focused on its defense product lines, with a strong backlog for 2025 and 2026. The company is exploring options to mitigate tariff impacts and is optimistic about potential trade negotiations. Future guidance projects gradual EPS and revenue growth, with strategic investments in automation and efficiency expected to bolster performance.

Executive Commentary

Chris Bitsykakis, President and Co-CEO, emphasized the company’s strategic positioning: "We have positioned both master batch and finished compound in the US in terms of a buffer." He also highlighted the robust backlog: "We went into 2025 with the biggest backlog that we’ve had on our defense product lines for a long, long time."

Risks and Challenges

• Economic and geopolitical uncertainties, including tariff impacts, could affect operations.
• Delays in the Bandolier program pose operational risks.
• The potential for trade deal renegotiations creates market volatility.
• Dependence on defense products may expose the company to sector-specific risks.
• Supply chain disruptions could impact production timelines.

Q&A

During the earnings call, analysts inquired about the company’s strategies for managing tariff impacts and the potential for reshoring opportunities from China. Executives expressed optimism about ongoing trade negotiations and highlighted preparations for inventory buffers to manage tariff applications.

Full transcript - AirBoss of America Corp. (BOS) Q1 2025:

Gren Schoch, Chairman and Co-CEO, AirBoss of America Corp: Good morning, ladies and gentlemen, and welcome to the Annual General Meeting of the Shareholders of AirBoss of Americor. We’re making today’s meeting available through both a video and a teleconference facility. Accordingly, I would like to welcome everyone who has been able to join us today in one form or another. I am Gren Schoch, Chairman and Co CEO of AirBoss of America Corp. Joining me today are Chris Spitzakakis, President and Co CEO Frank Antilli, CFO and Chris Fiegel, EVP and General Counsel.

I would also like to introduce our Board of Directors who are participating electronically: Anita Antinucci David Camilleri, Joanne O’Connor, Robert McCleash, Stephen Ryan and Alan Watson. For your information, we’ll start the meeting by addressing the formal agenda matters. Once all of these matters have been addressed, Chris Bitsakakis, Frank, Antille and I will each make a short presentation, including a discussion of our first quarter twenty twenty five results, a brief overview of last year and an update of our strategic initiatives. We will then follow that with a Q and A session, where we would welcome questions from participants. In conducting the business of the meeting, I would appreciate your cooperation in allowing us to move efficiently through the agenda.

In order to make the best use of our time, certain shareholders have been asked to move and second the resolutions, which we will consider at the meeting. I will call on them at the appropriate times. I would now like to call this meeting to order. Chris Mitsukakis and myself will act as co chairs of the meeting and Chris Faguel will act as secretary of the meeting. The Secretary has advised that the annual report containing the audited consolidated financial statements of the corporation for the fiscal year ended 12/31/2024, was mailed to the shareholders of the corporation on April 1125.

The notice of this meeting, the accompanying management information circular and the form of proxy were also mailed to the shareholders of the corporation on April 1125. I direct that the proof of service be annexed to the minutes of this meeting. Chris, myself and our Chief Financial Officer, Frank Antilli, will be available to respond to any questions concerning the financial statements during the general question period that follows the formal business. Before proceeding with the business of this meeting, I would like to take a moment to discuss the voting procedure. Each holder of a common share of the corporation is entitled to one vote for each common share held.

There are three formal items of the business to be dealt with today: a) to receive the annual report and financial statements of the corporation for the fiscal year ended December, to select each of the seven nominee directors to the Board for the ensuing year and c, to reemploy the Corporation auditors, KPMG LLP, for the ensuing year and the authorization of the directors to fix the auditors’ remuneration, all as described in management information circular of the corporation dated 04/11/2025. With the consent of the meeting, representatives of Computershare, Investor Services Inc, the corporation’s registrar and transfer agent will act as scrutineers and report the number of shareholder present in person and the number of shares represented in person or by proxy. I will now ask the Secretary to confirm the quorum for this meeting.

Chris Faguel, EVP and General Counsel, AirBoss of America Corp: Mister chairman, I confirm we have at least two persons present holding or representing by proxy 25% of the eligible votes, which results in a quorum.

Gren Schoch, Chairman and Co-CEO, AirBoss of America Corp: As a quorum is present, I declare this meeting properly constituted. I direct that the scrutineers report on the attendance be annexed to the minutes of this meeting. As a first item of formal business, I’d ask Frank Antilli, our Chief Financial Officer, to table AirBoss’ annual report to shareholders, which includes the audited consolidated financial statements for the corporation for the fiscal year ended 12/31/2024, together with the auditor’s report. Mr. Chairman, the corporation’s fiscal twenty twenty four annual report is tabled.

Thank you, Frank. A copy of the 2024 annual report has been mailed to all shareholder who requested a copy. Copies can be found online under AirBoss’ profile at sedarplus.com. We will now move to the second item of formal business, the election of seven directors to AirBoss’ Board of Directors. Nominations have already been proposed by management in the proxy circular.

All seven of our current directors have agreed to continue serving on the Board of Directors. Details about each of the director nominees are contained in this year’s proxy circular. Shareholders are required to cast their votes for each individual director nominee rather than voting for the entire slate. The meeting is now open for nominations for the election of seven nominees. Morissetti, would you please nominate the individuals listed in the proxy circuit as directors for the coming year?

Morris, Unspecified, AirBoss of America Corp: Mr. Chairman, I nominate each of Anita Antinucci, David Camilleri, Joanne O’Connor, Robert McCleash, Steven Ryan, P. Grenville Schach, and Alan J. Watson as directors of Airbus to hold office for the ensuing year or until their successors are elected or appointed.

Gren Schoch, Chairman and Co-CEO, AirBoss of America Corp: Thank you. Peter DeRooter, will you second the nominations, please?

Peter DeRooter, Unspecified, AirBoss of America Corp: Mr. Chairman, I second the nominations.

Gren Schoch, Chairman and Co-CEO, AirBoss of America Corp: Thank you. Are there any other nominations? I declare the nominations closed. Morris, may I have a resolution, please?

Morris, Unspecified, AirBoss of America Corp: Mr. Chairman, I move the following resolution. Be it resolved that each of Anita Antinucci, David Cannullary, Joanne O’Connor, Robert McCleash, Steven Ryan, P. Grenville Schach and Alan J. Watson be elected as directors of Airbus for the ensuing year or until their successors are elected or appointed.

Gren Schoch, Chairman and Co-CEO, AirBoss of America Corp: Peter, will you second the resolution?

Peter DeRooter, Unspecified, AirBoss of America Corp: Mr. Chairman, I second the resolution.

Gren Schoch, Chairman and Co-CEO, AirBoss of America Corp: Thank you. As you know, management solicited proxies for the business of today’s meeting. On behalf of management, I received proxies representing over a majority of votes cast for the election of each of the directors named in our proxy circular. Based on the proxy report received, the majority of the shares voted were cast in favor of each of the management’s nominees. Accordingly, along with myself, the following other six nominees have each been properly elected as directors for Airbus for the ensuing year: Anita Antinucci, David Camilleri, Joanne O’Connor, Robert McCleash, Stephen Ryan and Alan Watson.

If any shareholder or proxy holder is interested in the exact number of votes cast for or withheld from each nominee, you can get the particulars after the meeting from the Secretary. A press release and report on the voting results indicating the detailed results of the vote on the election of directors will also be publicly filed after this meeting on SEDAR plus The next item of formal business, the reappointment of KPMG LLP as auditors of the corporation and the authorization of the directors to fix the remuneration of the auditors. Morris, may I have a resolution, please?

Morris, Unspecified, AirBoss of America Corp: Mr. Chairman, I move the following resolution: Be it resolved that KPMG LLP, the present auditors of the corporation, are hereby reappointed auditors of the corporation to hold office until the close of the next annual meeting of shareholders or until their successors are appointed, and that the directors of the corporation are hereby authorized to fix the remuneration of the auditors in such amounts as the directors may in their discretion determine for the current fiscal year.

Gren Schoch, Chairman and Co-CEO, AirBoss of America Corp: Peter, will you second the resolution?

Peter DeRooter, Unspecified, AirBoss of America Corp: Mr. Chairman, I second the resolution.

Gren Schoch, Chairman and Co-CEO, AirBoss of America Corp: Thank you. On behalf of management, I’ve received proxies representing over a majority of votes cast for reappointment of KPMG LLP as auditors of the corporation and authorization of the directors to fix the remuneration of auditors. Based on the proxy report received, the majority of the votes of the shares voted were cast in favor of the resolution. Accordingly, I declare it carried. If there is no further business for this meeting, I will request a motion that the formal meeting has been terminated.

Morris, will you please bring a motion to terminate the meeting?

Morris, Unspecified, AirBoss of America Corp: Mr. Chairman, I move that the meeting be terminated.

Gren Schoch, Chairman and Co-CEO, AirBoss of America Corp: Thank you. Peter, will you second the motion?

Peter DeRooter, Unspecified, AirBoss of America Corp: Mr. Chairman, I second the motion.

Gren Schoch, Chairman and Co-CEO, AirBoss of America Corp: Thank you. All those in favor of the motion, please raise your hands. Contrary, if any, I declare the motion carried and the formal business of the meeting concluded. With the formal meeting now over, we will move to our management presentation. In terms of an agenda, we will start with our annual Chairman’s Awards, followed by a management presentation and overview of the first quarter results, which were released last night.

And then we will take questions starting with analysts covering our company and then from shareholders. To respect people’s time, we will do our best to be expedient. Turning to the Annual Chairman’s Awards. Every day at AirBoss, there is inspirational work being done across all our divisions and all departments with team members going above and beyond to ensure our continued success. In 2019, we created our Annual Chairman’s Award Program to formally recognize the special efforts made by our Airbus employees.

It is a peer to peer recognition program that has employees identify, recognize and appreciate a broad range of strong contributors who go above and beyond for Airbus. When selecting the Chairman’s recipient, we ensure that we have a strong representation of our Airbus employees by presenting an award to one peer nominated hourly employee and one peer nominated salary employee, who have both shown exceptional dedication and commitment as they have gone above and beyond for Airbus. I’m pleased to announce that yet again we had great employee participation this year with a total of three zero two employees nominated from across the organization and a selection of 13 divisional winners. From these 13 divisional winners, there were two employees that stood out and best exemplified Chairman Award attributes. I’m delighted to announce today that this year’s winners are Amy Bailey, Customer Service Representative and Master Scheduler from Auburn Hills, Michigan and William Prince, team leader in the filter production from Jessup, Maryland.

Amy has and continues to have a major impact on the people and business. She continues to be a business partner to the plant manager. She does her job selfishly and strives consistently towards excellence as the plant metrics continue to show. Her deep expertise, strong leadership abilities, creative problem solving have helped resolve challenges and can continue to drive success for our customers and Airbus. Trey, aka William Prince, took on leading filter production in 2024.

He met this challenge head on and executed at a high level to produce more than 80,000 filters in the final three months of last year. To do this, had to train more than 10 new staff members and manage a team of fifteen hour workers. Trey made himself available to complete whatever tasks were required to get the job done and did an excellent job communicating what he needed. I would like to congratulate both Amy and Trey on being the Chairman Award winners and to recognize their efforts. They will both be receiving the twenty twenty four Chairman Award trophy and a few other prizes to be given at a later date.

On behalf of the Board and our shareholders, I want to take this opportunity to thank all our nominees and winners across the organization for their outstanding contributions to Airbus. Before we begin with the next portion of our presentation, I will remind listeners that our remarks today contain forward looking statements, including our estimates of future developments. We invite listeners to review risk factors related to our business in our annual information form and our MD and A, both of which are available on SEDAR plus and our corporate website. Also, will discuss certain non GAAP measures, including EBITDA. Reconciliations of these measures are available in MD and A.

And finally, please note that reporting currency is in U. S. Dollars. References today will be in U. S.

Dollars unless we indicate otherwise. With that, I’ll now turn this call over to Chris Bitsykakis for the operational review. Chris? Thank you, Gren, and good morning, everyone.

Chris Bitsykakis, President and Co-CEO, AirBoss of America Corp: Airbus experienced positive traction in Q1 twenty twenty five following a challenging year in 2024 despite pronounced headwinds, which continue to impact each segment to varying degrees. The company continued to navigate obstacles related to economic and geopolitical challenges, including market softness, tariffs, inflationary pressure and the potential for further escalating and retaliatory tariffs, while maintaining focus on risk mitigation plans, including managing costs and targeting continuous improvement actions to build momentum at both Airbus Rubber Solutions and at Airbus Manufactured Products. Despite the increased economic uncertainty, disruption of trade flows, increased costs and strains on supply chains resulting from these challenges, management remains focused on the successful conversion of key opportunities to support future growth aligned with its strategic plan. The company expects further uncertainty to persist in the coming quarters with volume recovery difficult to anticipate as any recovery could be impacted by the imposition of further tariffs, duties or other restrictions on trade. A significant portion of the product manufactured by the company in Canada are sold into The United States and may be subject to the recently enacted tariffs as well as additional tariffs which could be enacted given the cross border nature of the company’s business operations.

The company continues to evaluate and execute on contingency plans and is reviewing all available options to deal with these challenges, including rebalancing production and sales activities between The U. S. And Canada in order to minimize the impacts on the company and its customers. AirBoss Rubber Solutions had improved results compared to the fourth quarter of twenty twenty four, with both revenue growth and margin expansion driven by an overall recovery in most customer sectors. However, there was volatility within Q1 twenty twenty five driven by the shifting tariff situation as customers attempted to manage the potential exposure created by tariff headwinds.

The segment remains committed to execution on its strategy to deliver strong results by focusing on specialized products, expanded production of a broader array of compounds, both white and color, and enhanced flexibility in attracting and fulfilling new business. As a segment, ARS continued to invest in research and development to support enhanced collaboration with customers. Airbus manufactured products experienced some positive traction compared to Q4 twenty twenty four, specifically in the Defence Products business. Overall, A and P also had a notable improvement compared to the first quarter of twenty twenty four, primarily due to the Defence Products business continuing deliveries on previously announced contracts and additional overhead reductions carried out in 2024 to help mitigate volume softness. Management also maintained its focus on operational improvements during Q1 twenty twenty five and continued to work with key customers with a goal of leveraging opportunities aligned with its growth initiatives.

The company continues to work closely with its suppliers and government partners to mitigate the previously announced delays to its Bandolier program and will provide further updates as more information becomes available. The Rubber Molded Products operations were impacted by continued volume softness related to the original equipment manufacturers shuttering production due to the impact of tariffs in the automotive sector, which continues to evolve. The business continued its focus on managing costs and a commitment to drive efficiencies and best in class automation as well as diversification of its product lines into adjacent sectors. I will now pass the call over to Frank for the financial review. Frank?

Frank Antilli, CFO, AirBoss of America Corp: Thanks, Chris, and good morning, everyone. As a reminder, all dollar amounts presented today are in U. S. Dollars except for dividends per share, which are in Canadian dollars. Percentage changes compare Q1 of twenty twenty five to Q1 twenty twenty four unless otherwise noted.

To be respectful of your time today, I will aim to be brief in my summary of our Q1 twenty twenty five results. Starting from the top line, Airbus consolidated net sales for Q1 twenty twenty five were CAD105.1 million, an increase of 1.6% from the prior year. The increase was primarily due to higher sales at AirBoss manufactured products defense business, partially offset by lower sales in the rubber molded products business and lower volumes at AirBoss Rubber Solutions. Consolidated gross profit for Q1 twenty twenty five increased by CAD 4,300,000.0 to CAD 18,500,000.0 compared with Q1 twenty twenty four and consolidated EBITDA for Q1 twenty twenty five increased to CAD 8,000,000 from a prior year of CAD 4,300,000.0. In both cases, the increases were driven by improved volume and mix at AirBoss manufactured products, specifically in the defense business, partially offset by additional softness experienced at the rubber molded products operations along with softness across the majority of AirBoss Rubber Solutions customer sectors.

Turning now to our individual segments. Net sales in the AirBoss Rubber Solutions segment for Q1 twenty twenty five decreased by 12.9% to CAD 57,000,000 from CAD 65,500,000.0 in Q1 of twenty twenty four. Volume decreased by 19.4% with decreases in most customer sectors. Tolling volume was down 76.3%, while non tolling volume was down 16.4%. Gross profit at AirBoss Rubber Solutions for Q1 twenty twenty five decreased to CAD 8,500,000.0 from CAD 11,000,000 in Q1 twenty twenty four.

Gross margin percentage decreased to 14.9% of net sales from 16.9% of net sales in Q1 twenty twenty four. The decrease in gross margin percentage was primarily due to mix, while gross profit was lower in Q1 twenty twenty five compared to Q1 twenty twenty four on lower volume, partially driven by tariff related volatility, product mix, partially offset by managing controllable overhead costs and continuous improvement initiatives. Net sales in the manufactured products segment for Q1 twenty twenty five increased by 26.6% to GBP 53,600,000.0 from GBP 42,300,000.0 in Q1 of twenty twenty four. The increase was mainly in the defense products business, offset by lower sales in the rubber molded products business. Gross profit at manufactured products segment for Q1 twenty twenty five increased to $10,000,000 from $3,100,000 in Q1 of twenty twenty four.

Gross margin percentage increased 18.7% of net sales from 7.4% of net sales in Q1 twenty twenty four. The increase was primarily the result of improvements in the defense products business, operational cost improvements and reduced overhead costs, partially offset by unfavorable volume and product mix in the Rubber Molded Products operation. Turning again to the consolidated results, free cash flow for Q1 twenty twenty five was CAD 4,400,000.0 compared to negative $7,400,000 at the end of Q1 twenty twenty four. During Q1 twenty twenty five, the company invested $1,900,000 in capital equipment versus $1,600,000 in Q1 twenty twenty four. Capital expenditures were related to cost savings initiatives, growth initiatives and minor plant upgrades within ARS and A and P.

By the end of Q1 twenty twenty five, our net debt balance was $96,000,000 versus $98,900,000 at the end of Q1 twenty twenty four. We expect to fund the company’s 2025 operating cash requirements, including required working capital investments, capital expenditures and scheduled debt repayments from cash on hand, cash flow from operations and committed borrowing capacity. The company has a revolving credit facility that provides for a maximum borrowing of up to $125,000,000 with a $25,000,000 accordion. As of 03/31/2025, total available borrowing capacity under the facility was $79,800,000 with $54,500,000 drawn. With that, I will now turn the call over to Chris.

Chris?

Chris Bitsykakis, President and Co-CEO, AirBoss of America Corp: Thank you, Frank. As mentioned at the opening, this meeting is being made available both via conference call and via webcast. We will now take questions from individuals attending in person, following which we will take questions from those who have submitted questions through the conference call line and then open up the meeting to questions from those attending via webcast. We will now open the floor to questions from anyone attending the meeting in person.

Kevin, Analyst, CIBC: Hi. Thanks for taking my question. It’s Kevin from CIBC. I appreciate the recap of Q1 results. Just wondering, as you evaluate your portfolio here and I guess with the improved outlook with defense spending, just wondering how that might shift what you might view as core or noncore products within BOSS here?

It seems like you have some good momentum across a number of your product lines. How has that shifted maybe some the initiatives you would have rolled out, I guess, this time last year as you look to simplify your business?

Chris Bitsykakis, President and Co-CEO, AirBoss of America Corp: Yes, that’s a great question. I’d have to say that our strategy remains intact. Our view on core versus noncore hasn’t changed. In looking at core versus noncore, we know that we have a lot of product lines that have the potential to generate significant revenue for us. The question isn’t whether on a month by month or quarter by quarter basis, they are generating that revenue.

But what’s sort of the long term view of where the corporation is going with respect to its different product lines? So we are staying steadfast on the strategy that we developed last year that has been approved by the Board. And as we look at core versus noncore, as noncore businesses start to do well, that’s certainly a positive time to start looking at monetizing them and sticking to our original plan strategically.

Kevin, Analyst, CIBC: That’s helpful. Just maybe my second question is, you do have a manufacturing footprint on both sides of the border. Just any shifts in how you’re thinking about your production and maybe where these products are being produced to alleviate potential tariff risks? Or has it been challenging? Or maybe just the uncertainty makes it difficult to make those decisions today until you have greater certainty on, I guess, tariff regime you’re working under.

Just wondering how you think about shifting production between Canada and The US to potentially mitigate tariff risk.

Chris Bitsykakis, President and Co-CEO, AirBoss of America Corp: So we do have capacity in The United States to shift a certain amount of our production there if need be. Obviously, we’ve been operating under USMCA and NAFTA before that for many, many years without any concerns in terms of cross border shipments. I’d say the one rebalancing, looking at the amount of capacity that we have in rubber compounding just because the flagship plant is in Canada. We have two other facilities in The United States that also are compounding rubber, and we just installed our new silicone line in Detroit as well. Not thinking about tariffs, but just having it co located closer to its first customer, right?

So I’d say probably as we look forward here, we’re going to be looking for opportunities to increase rubber compounding capacity in The U. S. Do have a very strong mitigation plan in case something goes sideways, although we’re feeling a little bit more optimistic that there should be some sort of trade solution validated between The US and the Canadian governments. But we do have contingency plans in place that should be able to allow us to retain the work that we currently do in The US. Of course, this uncertainty is probably the biggest concern, but I’d say in a longer term basis establishing more compounding capacity in The US is probably something that’s going be a priority for us going forward.

At this time, if there are no more questions in the room, I don’t see any more hands, we’ll go to any questions that are queued up on the conference line.

Unspecified, Conference Operator: The first question comes from Tim James with TD Cowen. Please go ahead.

Tim James, Analyst, TD Cowen: Thanks very much. Good morning, everyone. Chris, maybe just looking at the first quarter here and staying on the subject of tariffs. Could you talk about what you’re seeing in terms of customer behavior in ordering on the Rubber Solutions side of the business, just given sort of the uncertainty related to tariffs? And again, I don’t know whether there are sort of positives or negatives coming of that, customers sort of ordering more product ahead of time or just sitting on the sidelines.

Just if you could speak to the customer behavior in the last sort of weeks, couple of months.

Chris Bitsykakis, President and Co-CEO, AirBoss of America Corp: Yeah. The customer behavior has been really evolving, and thanks, Tim, for question. In the beginning, there was almost kind of very nonchalant approach from our customer base in The US. They weren’t following the tariff situation as much as we were. We were the ones communicating with them, talking about the necessity to qualify the production of their compounds in The US or preparing them for having to pay the tariffs, you know, on their material.

But they were very nonchalant about it because I think the assumption was that this was just a negotiating tactic by the president and probably it would be something that we wouldn’t have to worry about. I think as the first rash of tariffs started to happen as it as it related to, you know, steel and aluminum and more more recently the the vehicle production, I think it took on a much more higher level of urgency from our customer base. And so those customers very quickly started working with us to qualify their material to be made in The U. S. We have positioned both master batch and finished compound in The US in terms of a buffer so that we have inventory in The US to be able to manage sort of temporary tariff applications, which we haven’t quite seen that yet, but we are protecting both our customers and ourselves from that perspective.

And I think right now customers are working very diligently with us to make sure that they have at least their products qualified out of our plants out of our two plants in Carolinas. And now it seems to have been shifted at a little bit more optimistic and a little bit less intensity on from their perspective as they see certain trade deals starting to come to the forefront. There is some there’s a report in the news today that there may be a a trade deal between The US and The UK that that could be announced soon. So I think as these trade deals start happening, and I know our our newly elected prime minister met with president Trump at the White House yesterday and appears to have some level of optimism that we should be able to negotiate something. So I think the customer sentiment has gone from almost very nonchalant to very concerned and now somewhere in the middle, a little bit more optimism that something should be done.

Now many of our customers or some of our customers have us dual sourced on certain compounds. So they have options to buy from us or other people, but we have a significant amount of customers that are using Airbus proprietary compounds. And they of course are more concerned because we do produce a very high quality product, a highly engineered product, and it’s very difficult for them. So the prospect of them having to pay more for it is concerning. But, again, I think right now, their overall concern is that the economy itself stays intact, and their assumption is that there should be some sort of trade deal negotiated that that should protect them.

But I think that’s anybody’s guess at this point.

Tim James, Analyst, TD Cowen: Okay. That’s a great answer. Thank you. If I can ask a second question. Within the manufacturing products group, defense versus anti vibration, are we talking all about in the first quarter kind of changes in margin percentages in those two businesses and just on a high level, Roche, disclose that specifically.

Is it reasonable to assume that the growth in defense and the decline in anti vibration on a year over year basis margins kind of move directionally in line with that? In other words, in defense and lower in anti vibration? And then anything you can talk about in terms of sort of your long term expectations for margins in that segment, either on a total segment basis or thinking about those two products line up separately?

Chris Bitsykakis, President and Co-CEO, AirBoss of America Corp: Yes. We give information on margins product line by product line, but I think it’s fair to say that the defense products will have a higher margin than the automotive products would. So having said that, as the product mix shifts, you’ll see the margin shift as well in that particular way. But then of course, it’s not completely linear because there could be volume differences and sort of the product mix gets calculated on a total basis. But certainly the defense products and you know we are just in the process of launching the new Mallow production out of our facility in Detroit as well as some of it in our facility in Actonville.

So you’ll see that impact going forward late Q2 and into Q3 and Q4 because it impacts all of our different plants. We’re compounding the material in our North Carolina plant. We’re molding it in our plant in Auburn Hills, Michigan. And of course, the defense group is selling and marketing it. So you’ll see the defense products drive a higher margin, but the products that we’re making on the automotive side and the non automotive side, there’s been some significant work done in automation and continuous improvement.

And we are also seeing a lot of interest in reshoring of material from China into into The US right now. So so we suspect that we should be able to continue to drive margins positively both on the defense and the non defense part of of AMP.

Ahmed Abdullah, Analyst, National Bank of Canada: Great. Thank you

Tim James, Analyst, TD Cowen: very much. The

Unspecified, Conference Operator: next question comes from Ahmed Abdullah with National Bank of Canada. Please go ahead.

Ahmed Abdullah, Analyst, National Bank of Canada: Hi, thanks for taking my question. You’ve highlighted the 1Q twenty twenty five volatility in your ARS business. Can you speak at all to how April is shaping up? And if that volatility kind of continued into April and our customers kind of building up inventory to avoid any potential tariffs?

Chris Bitsykakis, President and Co-CEO, AirBoss of America Corp: Yeah. We started building some inventory in q one both on behalf of our customers and they also, you know, the ones that were concerned about it were building up some of their own inventory as well. In q two, I’d say that we we continue to see this volatility in the in in April, I think, and probably early May. I think now that we’re getting towards the second half of q two, we’re seeing things kind of calm down a little bit and normalize a little bit. So again, I think it it kind of follows that same, you know, answer that I I just talked about with with Tim Tim James on the customer sentiment.

I think as customers are feeling better, they’re, you know, going back to a bit of sense of normalcy. Now whether they’re feeling normal is, is justified or not, I don’t know. But I’d say going into the second half of of, of q two, we’re seeing a little bit of that normalcy return. I think the the big question right now is with some of these trade policies, what is the potential of an overall economic slowdown in The US, which would certainly impact ARS more so than than our defense products, are on a set schedule accordingly. But, you know, if there was a generalized sort of recession starting to brew, I’d I’d say that on the rubber compounding side and our on our automotive products, we may see some some headwinds there.

But at this point in time, I think people are feeling like we should return to some level of normalcy once these trade deals start getting put, you know, put to bed.

Ahmed Abdullah, Analyst, National Bank of Canada: Okay. I mean, giving all the moving pieces in the tariff discussions in the news, I was just wondering, have you had to pay any tariffs across your product portfolio? And how have been the offset like the pricing offset discussions, how have these gone with customers so far if you had to pay?

Chris Bitsykakis, President and Co-CEO, AirBoss of America Corp: Well, all of our products that are currently shipped into The US qualify under USMCA. So the fact that USMCA is still intact, we have not seen any major financial concerns from from that perspective. However, we were very transparent with our customers and as you know, Ahmed, that we price monthly to all of our customers and we were pre warning all of them that they had, you know, a couple of options to work with us on qualifying their material in The US or be prepared to pay for whatever tariff comes about. And so you can imagine how those conversations go. They’re they’re not pleasant, but in general, our customers have been with us for years and years.

Some ten years, some thirty years, some, you know, new customers a little bit less. But we have very good working relationship with our customers, and we we expect, you know, you know, that working relationship to help solve some of these pricing disputes if they arise. But at this moment in time, we haven’t had to go there, and we’re hopeful that the USMCA stays intact and and we don’t have to have those kinds of uncomfortable discussions with them. And a lot of the defense products that we make in in in in Quebec, they get exported into The US. We have special clauses in our in our defense contracts that allow them to flow duty free as well.

So at this moment in time, we have not seen any major problems with it. It’s just that uncertainty because we don’t know day after day what new decisions are gonna be made and and what could potentially happen.

Ahmed Abdullah, Analyst, National Bank of Canada: Okay. Thanks for the color. And just finally, on the defense business, can you give us a sense as to how your backlog for bids look like there? And with just a general size of what you’re expecting in terms of awards this year that could materialize?

Chris Bitsykakis, President and Co-CEO, AirBoss of America Corp: Well, we we went into 2025 with the biggest backlog that we’ve had on our defense product lines for a long, long time. And so we’re pretty optimistic that for the next, you know, period of time this year into next year that the defense products are gonna be producing, you know, quite a bit of revenue and contributing positively to the bottom line of the company. We’ve stopped talking about pipeline and now just start talking about we’re talking mostly about backlog. So certainly, we are bidding on multiple programs all the time, and we feel good about the general kind of trend of defence spending globally. You know we announced another award earlier on the CBRNE side with a European customer And so we see a lot more inquiries out of Europe who are really upping their defense spending.

We’re seeing more opportunities in Canada. We’re seeing more opportunities in Australia and throughout all of our NATO partners. So I I’d say the the pipeline is strong, but we’re mostly, really, really optimistic that this backlog is gonna generate good revenue for us. And, as new awards happen, we’ll we’ll be announcing them individually.

Ahmed Abdullah, Analyst, National Bank of Canada: Okay. Thanks for the color. I’ll get back in queue. Thanks.

Unspecified, Conference Operator: There are no further questions from the conference line.

Chris Bitsykakis, President and Co-CEO, AirBoss of America Corp: Great. Thank you. Since we’re concluding the questions from the conference call, I would like to now ask Chris Faguel to read any questions that may have been submitted electronically.

Chris Faguel, EVP and General Counsel, AirBoss of America Corp: Mr. Chairman, that concludes all of the questions.

Chris Bitsykakis, President and Co-CEO, AirBoss of America Corp: Okay. Since there are no further questions, ladies and gentlemen, thank you for taking this time to attend this meeting. Have a great day.

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